Paving the Way to a Happy Retirement

How can you help members grow dollars and confidence as they leave the workforce?

Those who have retired can share their experiences and perceptions of retirement to help others pave the way to happy financial futures, and their life lessons can be impactful for those who are not yet ready to retire.

A study by New York Life of octogenarians reveals four components to a secure and happy retirement, according to lifehealthpro.com.

1. Wealth, not health, is the deciding factor in when to retire. Financial readiness was most important for 68%, state of health was important for 53%, and age counted for 42%.

2. The first years of retirement were the best, the opinion for 72%. Twenty-four percent said the first year of retirement was the best.

3. People live longer than they expected. Fifty-four percent indicated they outlived their own expected lifespan.

4. “Get your income on autopilot,” 88% of octogenarians suggest younger people “re-create pension-like income for their retirement.” Fifty-two percent think such sources of revenue provide peace of mind in the absence of active management of funds.

Says Ross Goldstein of New York Life, “We hope younger generations listen closely to what octogenarians report about how they planned for retirement and how this planning worked for them once they got there.”

What can we learn from the experiences of current retirees, and from the current behaviors of younger consumers planning for retirement? How can you help members create happy retirements?

‘Action springs not from thought but from a readiness for responsibility.’ --G.M. Trevelyan, British historian

A BMO Harris Premier Services survey shows 44% of consumers don’t know when they will retire, and 57% don’t know how much money will be required. On average, people start retirement savings at around age 28, “and 75% of respondents under the age of 60 are taking steps to save for retirement with a 401(k) or IRA.”

But, the article notes, it is important that people consider the lifestyle they want to have in retirement and plan accordingly.

Procrastination is the biggest problem when it comes to retirement saving, reports The Street. Fifty-nine percent of survey participants set a goal in 2015 to contribute toward retirement, but only 31% did so.

“As usual, the primary challenge for U.S. retirement savers is their own questionable tactics for managing their household assets and steering those assets towards long-term savings.”

Further, “people with the most time to save seem to be the most impacted” as debt and other financial demands take priority.

Survey highlights:

In 2015, 27% of millennials set retirement funds aside.

Sticking to a budget is a problem for 36% who wished they had done so in the previous five years.

Only 38% whittled away at debt in 2015; this was a goal for 51%.

Best practices for those inclined to defy savings procrastination include working with a financial pro, saving money, put dollars into long-term savings vehicles, and to participate in tax-advantaged funds.

A survey by Aon Hewitt shows 68% of American workers regularly save for retirement but one-third do not.

Thirty-seven percent of participants cannot afford to set money aside, “the most highly cited barrier to saving.” Other issues include inability to access funds, lack of knowledge about how to save, and no current need to save.

Fifty-three percent have estimated how much money will be required at retirement.

Yet, only 40% have a financial plan and only 17% used savings resources provided by employers.

“While about three quarters of employees are contributing to their employer’s retirement plan, many are contributing very small amounts. Thirty-seven percent report contributing 5% of their pay or less, 35% contribute 6% to 10% of pay, and 11% contribute 11% to 15%.”

‘By failing to prepare, you are preparing to fail.’ --Benjamin Franklin

Research findings indicate boomers need to make saving for retirement a greater priority.

“Older Boomers Have Less Saved than Gen Xers,” according to an article at cnbc.com. Consumers age 60+ have a median retirement fund of only $50,000 in comparison to those 55 to 59 who have set aside three times that amount. This group started to save at age 31 while those 60+ did not start to save until age 37.

Consumers between the ages of 40-49 started saving around age 27 and have “a median $80,000 put away for retirement.”

Saving more money at a later date does not allow consumers to make up dollars lost as a result of compounding.

1. No access to employer-sponsored savings plans for retirement. As of March 2015, only 49% of those working in the private sector had ability to contribute to employer-sponsored plans like a 401(k).

2. Financial emergencies like medical expenses or home repairs take precedence over saving. “Financial ‘volatility’ is the norm, not the exception, for the vast majority of American households, including among the wealthy.” Sixty percent of households have swings in monthly spending to exceed 30%.

3. College expenses take a toll on retirement funds as consumers sacrifice retirements to fund their kids’ educations.

4. Incomes do not allow consumers to save; “median incomes haven’t yet caught up to pre-recession levels,” the article notes.

The Motley Foolsuggests four things might haunt those who fail to consider them pre-retirement: where to retire, that Social Security is not as easily understood as people think, that people don’t appreciate the differences between income streams at work versus in retirement, and that it is difficult to return to the labor force post-retirement.

Further, “The biggest regret of middle-income baby boomers was that they didn’t work longer. More than two-thirds (69%) of boomers” have this regret.

“Successful savers rely on a little support from their friends” and over 9 in 10 consumers who find success saving have a “retirement advisory network.”

This network consists of spouses or partners (325), financial advisors (415), and others like family, employers, or accountants. Ninety-five percent will look for help as they make financial choices, and the best way to build such a network is for consumers to be deliberate, be responsible, use available resources, plan for a variety of circumstances, and consult those who can be trusted.

What can you do to help your members grow dollars and confidence as they pave the way toward a happy retirement?

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